State of The Nation Address: SoundCloud To Offer Subscription Option

My fellow Nationals. I write to you all today to talk about the current state of streaming services in the music industry. If you read that in a Barack Obama voice…you get nothing, but thanks for having some wit about you. So ABR (@AlecBurnright) put me onto the latest news over in Soundcloud.com land courtesy of an article recently published by Billboard.

By now we’re pretty much all familiar with the music streaming service, that houses records for both major and independent musicians alike. From its inception by its creators, Swedish musicians Alexander Ljung and Eric Walforss, Soundcloud has served as an extremely user-friendly music streaming platform. More importantly, for all intensive purposes…it’s been completely free of charge for users. However, it’s only one platform in an already over-saturated market.

If you’re like me, then you’ve scrunched up your nose several times over, wondering how a tool like this could actually make money, especially with all the competition. We’re pretty familiar with the available internet revenue streams, and those available by other similar services: Spotify, Apple Music, Pandora and such. Soundcloud however, was never really bombarded with ads. And actually, outside of the related tracks algorithm, it remains pretty straight forward to date.

It’s easy to enjoy, upload and download music and really provides a level platform for any artist. Did I mention it was free? Soundcloud users never used to expect a royalty check for their music. It was simply a means to share their music. Best case scenario? The record doesn’t get picked up by the general user-base and barely get more than a couple hundred spins. Worst case scenario, a record gets 250K+ spins and then you start to wonder if you were owed some kind of payment for your contribution to society.

Naturally, when I initially read about Soundcloud’s financial woes, I wasn’t completely shocked. As the Spotifys and Apple Musics of the world began to sew up licensing agreements with major record labels, Soundcloud was kind of just chugging along, business as usual. Naturally, given the state of music, and how much the internet and streaming services have evolved in recent years, every major label has been in a mad dash to recoup as many royalties as possible.

Sony, up until a few days ago had been pulling all of their music, as there was currently no sort of royalty payment structure in place, until they recently officially inked a deal with Soundcloud, thus allowing them to receive royalty payments based on the performance of their records across the site. And so the cycle begins (or continues depending on how late you are to the party).

In the case of Soundcloud, a company that in 2014 spent $63.8 million to generate $19.7 million, I’d like to picture their headquarters with the Joker lighting a big pile of cash on fire. This has been the story for Soundcloud for some time now. It may make more money year after year, but it spends even more year after year as well, and the numbers just don’t fall in their favor. It has since raised another $77 million in funding, but still foresees another 3 years of losses. Remember when we all laughed at Tidal?

So what does all my rambling about Soundcloud have to do with you? Well frankly, if you’re in the music industry – major or not – the general goal is pretty much the same: get paid for your music. Naturally we all can’t organize an epic world tour, yet alone book consistent gigs in our hometowns. And since I don’t expect anyone to do a million dollars worth of sales in tour/merchandise in a day, we have to just tackle this thing one step at a time. As balance in the universe is inevitable, the internet has continued to level the playing field… but not for too much longer.

Riding the monetization wave, major streaming services all promise the same thing, royalties based on the performance of their content. If you’re working on YouTube, you can expect a certain amount of plays, ad impressions, ad clicks or conversions, likes, comments, shares, subscribers and I think that’s pretty much it. All streaming services promise higher and higher payouts than the next, but in reality, unless you’re a top 1000 YouTube star (which isn’t impossible to become, based on the rubbish content from most of those top 1000 YouTubers) you’re going to continue working for percentages of pennies of the dollar.

In YouTube’s case approximately, $2.50 per 1000 views isn’t uncommon. In order to make $1000 per month, a content creator would need 400,000 views per month, which is roughly about $0.0025 per view. A fraction of a penny. It’s how royalties have always been. Prior to the advent of streaming services, the only way to really collect a royalty check was to have a major record/tv deal. Fast forward to today and all you need is a laptop to set up and manage your accounts.

Where do we go from here then? Well for starters, you really kind of have to be doing Drake numbers every month in order to ball off royalties from streaming services. However, it seems like the best tactic would be to try and collect from as many possible revenue streams available. In Soundcloud’s case, even with their new agreements and plans to add a subscriber only user-base, it will only further blur the lines between them and any other Pandora or Amazon Music. Streaming has continued to grow in comparison to digital downloads, which means people would rather jam your shit for the moment than spend money to “own” it. From the consumer’s standpoint, it’s a pretty savvy decision, especially at the rate music is being created, released and then propelled into the spotlight.

Even a paid subscription still makes sense. $120 a year for access to millions more worth of music still seems better than $0.99 per song. Whenever Soundcloud finally does jump on board, I’d expect to see a similar collapse. The introduction of advertisements to lure subscribers into a paid version of the experience, promising to be ad free. If you pay for a subscription, they win…and if you don’t, then you have to endure advertisements…which they will still get paid for…and thus…continue to win. How long can this model last for? How profitable can an independent artist become? For those questions and more, I have no answers.

At this point, all that’s left is to throw your cap in the ring and collect. Research and sign up for as many streaming services as possible. Get your numbers right to make sure you’re ready to collect any potential royalty payouts…and keep pushing your music, both physically and financially. Most importantly, don’t let streaming services be your only revenue stream when it comes to your music. Every artist has different opportunities available to them, so don’t ever limit yourself. In the end, these streaming services don’t ever have the content creators best interest’s at heart. We’re still nothing more than piston heads in the still outdated internal combustion engine that is the music biz, so don’t be afraid to misfire from time to time.

A tree in the forest still makes a sound when there’s no one around to hear it, but think about what it would be like if you could charge them for the experience of hearing it.